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Managing a Supply Chain Affected by Trade Disputes

by
Wendy Buxton
| Dec 06, 2018

The escalating tariff race between the United States and China is forcing companies around the world to consider their supply chains and the impact of trade disputes on their supply chains. This trend doesn’t seem to be going away soon, which has many businesses shifting to alternative vendors to avoid increasing tariffs from both countries.

Are you prepared to rebalance your supply chain if necessary?

When increasing tariffs or other disputes start to eat away at your profits or even disrupt your physical supply chain, the first step is to evaluate whether a short-term rebalance or long-term shift is necessary. Larger companies minimize the hassle of supply chain rebalancing by having plans in place — but if this your first trade dispute rodeo, your company may not be prepared.

Even outside our current geopolitical environment, offshore production always comes with some amount of risk. Whether it’s a natural disaster, military incident, or political event, the distance and difference between countries can potentially disrupt your current supply chain. Depending on the root cause of the disruption and its expected resolution, companies may not be able to wait for conditions to return to normal if they want to maintain a successful position in their market.

We’re in the midst of a major trade dispute right now. Even if your supply chain is unaffected, the current trade climate is a good reminder to create a series of potential scenarios in case something does disrupt your operations.

Flexibility can reduce stress on your supply chain, but it won’t solve everything

There’s only so much you can do in response to a sharp cost increase due to an overseas partnership. It takes time to find different suppliers, perform risk assessments, define new logistics channels, or open new manufacturing facilities in the United States. One of the main benefits of building flexibility into your supply chain is to reduce the stress of events outside of your control.

The qualities of a flexible supply chain include ease of scaling, cost effectiveness, and lowering your liability. Scaling is especially important in these times. We like to think about scalability in terms of growth, but the ability to reduce operations without additional damages is helpful during supply chain disruption.

Building close, communicative relationships with partners and providers across your supply chain might seem like just good supply chain management, but doing so can help boost your flexibility too. Making sure everyone is on the same page — particularly during times of crisis — and ensuring they understand your response to negative events can help rebalancing go much more smoothly.

Plan for disputes before they happen

No one can predict the future, but the least we can do is prepare for different outcomes. Even if your supply chain is unaffected by the current trade dispute, learn how other businesses are handling this disruption and consider potential risks and solutions if the situation ever arises for your company.

This could mean creating new risk assessments in response to political and trade dynamics or reviewing and networking potential “backup” partners throughout your supply chain. Updating your supply chain management technology may help you close inefficiencies in your system, which can create potential revenue cushions and free up employee time to plan ahead.